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Washington, D.C. is the #5 state with the lowest property taxes

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January 14, 2022
Andrei Medvedev // Shutterstock

Washington, D.C. is the #5 state with the lowest property taxes

Ask any homeowner about expenses and they’ll tell you: If you’re a first-time buyer, you need to carefully calculate the total cost of owning a home before taking the plunge into homeownership.

Owning a home comes with dozens of additional costs, from mortgage payments and interest to upkeep, renovations, and household utility bills. It doesn’t take long before expenses add up—especially when they come on top of potential property tax costs.

To determine which states offer the lowest in property taxes, Roofstock analyzed 2021 data from Wallethub and the U.S. Census Bureau. Costs were then determined for real estate property tax rates, median real estate tax payments, and median home prices for every state and Washington D.C. These amounts were then contextualized with what first-time homebuyers need to know about property taxes.

District of Columbia by the numbers

- Effective real estate tax rate: 0.56%
- Annual taxes on $217.5k home: $1,221
- District of Columbia's median home value: $601,500
- Annual taxes on District of Columbia's median home: $3,378

The median home value in Washington D.C. may exceed half a million dollars; but what the home prices lack in affordability, the District of Columbia makes up for in low effective real estate tax rates.

Annual assessments occur on properties in D.C., which would typically mean that homeowners are risking a hike in home value and their property taxes each year, but there are a number of property tax deductions and credits available to homeowners in this district to reduce their overall tax bills. For example, the Homestead Deduction, which is available for homeowners who reside in a residence with no more than five units, reduces the assessed value of the home by $75,700. Other deductions and credits, like the Senior Citizen or Disabled Property Owner Tax Relief program and the First-Time Homebuyer Individual Income Tax Credit, help to further reduce the cost of real estate taxes in D.C.—as does the Assessment Cap Credit, which protects homeowners from rapid home price increases and limits increases in assessed values to 10% per year.

In some states, the high cost of property taxes can cause a home with an otherwise affordable price tag to be well out of someone’s price range. In others, the low cost of property taxes could give you a little more wiggle room in your budget—which is never a bad thing.

If the idea of weighing the estimated costs of property taxes seems overwhelming to you, start by looking at the states with the lowest property taxes listed below. The national list is reverse-ordered by effective real estate tax rate, with Hawaii as the state with the lowest property taxes, though the results would look different if it was ordered by the taxes on the state's median home. Whether you're looking for a dream home or next big investment, owning a home comes with several additional costs, property taxes being one of them.

States with the lowest property taxes

#1. Hawaii: 0.28% effective real estate tax rate
#2. Alabama: 0.41% effective real estate tax rate
#3. Colorado: 0.51% effective real estate tax rate
#4. Louisiana: 0.55% effective real estate tax rate
#5. Washington, D.C.: 0.56% effective real estate tax rate

This story originally appeared on Roofstock and was produced and distributed in partnership with Stacker Studio.

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